"Ignore Japanese alpha at your peril" says GFIA

Beverly Chandler, Opalesque London: GFIA addresses the subject of the resurgence of hedge funds in Japan in this month’s issue of their research insights, asking is the recovery rational, or a false signal?

"Compared with when we last visited the topic two years ago, Japan seems to have
regained investors’ attention; it might even become a pain trade, too important to omit
in the context of a global portfolio. Bloomberg reports that "the rally in Japanese stocks
since new Prime Minister Shinzo Abe … is starting to stir investor interest in hedge funds",
and it certainly doesn’t discourage that Eurekahedge has just reported the best three month
performance on record for their Japanese hedge fund index through February."

In their quantitative research piece, GFIA looked at the Japan absolute return universe,
and quantified some of the characteristics of the constituent funds over the years. "We note
however a precipitate drop in the number of listed funds since our last Japan-focused
study; our final universe consists of 96 funds, less than half the number listed in May 2011.
A grizzly market watcher might comment that when there’s been an exodus of alpha
seekers from a market, those that are left should have a field day."

Funds drawn from the AsiaHedge and GFIA’s own database were divided into three categories: long-only funds, long/short funds and market
neutral funds. They then examined three risk-return attributes ......................